Startups expand background checks to get the hire right

As much as 87% of discrepancies found during a recent survey by background screening solutions firm First Advantage were at the level of senior managementSaumya Bhattacharya&Sreeradha D Basu | ET Bureau | August 08, 2017, 13:30 IST

As much as 87% of discrepancies found during a recent survey by background screening solutions firm First Advantage were at the level of senior management. Of these candidates, 42.3% were in the 22-30 age group, indicating that a significant chunk of them belonged to the startup ecosystem.

“We see more startups seeking background checks. Wrong hiring can sully the image of the startups, and cash-strapped startups can’t afford to hire the wrong person,” First Advantage managing director Purushotam Savlani said.

Employees can easily go from being assets to liabilities, and pose a risk to the credibility established by the startup, especially those in the financial technology sector, he said. Most of the background checks that the startups want to do are in skills, leadership styles, credentials and possible cases of sexual harassment against the potential employee.

Paytm has engaged a professional agency to validate the past employer credentials, educational qualification and criminal antecedents for all new employees. “Any reported noncompliance in background verification ensures strict action against the candidate, leading to revocation of the offer or termination of employment. Candidates are made aware of this procedure as a part of the selection experience,” said Paytm associate vice president Manav Jain.

Customer-facing roles, in particular, are a key focus area when it comes to background checks during the hiring process. “These are the folks who are actually delivering to people’s houses, so safety is a key issue,” said TN Hari, HR head at online grocery player BigBasket.

we have two agencies to do background checks on these individuals for us,” he added. For senior management, informal reference checks are conducted to see where the potential hire stands on issues such as integrity, taking ownership, overall attitude, etc., said Hari. At online furniture and home décor brand Urban Ladder, the company religiously does three things when hiring employees and senior management: mandatory reference checks through internal or external networks, a legal verification for customer-facing employees and putting them through a thorough training and induction process. “Background checks and verifications are essentially fencing mechanisms for an organisation,” co-founder Rajiv Srivatsa said. One of the reasons startups are seeking more background checks is that in such early-stage companies, there are fewer people overseeing payroll, checks and vendor lists, making it easier for an insider to siphon off money and get away with it. “Running thorough background checks and reference checks help startups protect themselves from these types of bottom feeders, and is one of the reasons you should expect a background check before being hired with a developing entrepreneurial firm,” said First Advantage’s Savlani.

At the top levels, ensuring the right hire becomes much more important. “The impact of senior management hires is massive in a company’s evolution. You need to have a thorough understanding of that person’s integrity and values. The more companies align on that right from the beginning, the better it is for all concerned,” said Sandeep Murthy, a partner at venture capital firm Lightbox Ventures.

But while screening is important, so also is hiring someone who is the right cultural fit. “We screen for aptitude, but hire for attitude,” said Murthy. Vivek Prabhakar, CEO of Chumbak Design, said while senior hires are always carefully vetted, for him the more important aspect is the culture test to see whether the candidate is a good fit for the company.

“We don’t want people who engage in politics or disrupt the equilibrium of the organisation. What we are looking for are people who gel with the organisational culture; others are weeded out,” Prabhakar said.